Setting up a Company

In recent years, the Government of Pakistan has substantially simplified the regulatory environment for setting up a business. Administration of investment is now concentrated with the Board of Investment (BOI) and the Security and Exchange Commission of Pakistan (SECP) in a kind of one stop shop system.

The recent reduction in the number of days to set up a business is significant and ranks the country among the best in this regard in Asia.

The pace of performance of public facility work has been improved considerably. There is a substantial reduction in the processing time (1-2 days) in providing availability of name certificate, granting of certificate of incorporation, mortgage certificates and certified copies of documents.

Please note that information provided is for guideline purposes only. For further information please contact a member of the IPTU Team.

Securities and Exchange Commission of Pakistan

Securities and Exchange Commission of Pakistan (SECP) established under the Securities and Exchange Commission of Pakistan Act 1997 was operational as a body Corporate on 1st January 1999.

One of the important functions of the SEC is incorporation/registration of companies. This task has been entrusted to the Registration Department, Company Law Division which has its field offices known as Company Registration Offices (CROs) for the purpose of incorporation / registration of different type of companies.

Since inception of the SECP, a number of operational changes have been introduced and a friendly environment has been created at the head office and the CROs.

Incorporation of companies has been made much easier, smooth and swift ensuring completion of this process preferably on the same day and in any case within three days at the latest.

Overseas Security Information for Businesses (OSIB) at FCO can assist businesses by providing information on security and political risk which businesses may face when operating in particular markets overseas. Areas covered may include terrorism, crime and civil disturbance, local politics, local law enforcement arrangements, personal protection, bribery and corruption, human rights, ownership of physical or intellectual property rights and transborder issues.

Board of Investment

In order to streamline and co-ordinate the process of investment and to create an investor friendly culture in the country, the government established the Board of Investment (BOI) as the central investment promotion and facilitation agency.

The Board of Investment is chaired by the Head of the Government, and overseen by the Minister for Industries and Production. See the present Organizational Chart of BOI.

The main functions of the Board are to promote investment opportunities in all sectors of the economy and to provide investment facilitation services to local, foreign and Overseas Pakistani investors.

The BOI acts as the focal point of contact between potential investors and all the agencies of the government concerned with investment proposals and responsible for providing infrastructure and other facilities. To strengthen the leverage and effectiveness of the BOI and to benefit from their experience, Ministers and Secretaries of critical Economic Ministries are actively associated with all activities of the BOI.

Foreign Investment

Foreign investment is generally subject to the same rules as domestic investment, with the exception of certain sensitive areas such as defense production, banking, and broadcasting.

There is little apparent denial of national treatment for foreign firms. There is also no evidence of statutory derogation from national treatment.

For example, the Foreign Private Investment (Promotion and Protection) Act, 1976, specifically provides that foreign investment shall not be subject to more taxation on income than in investment made in similar circumstances by Pakistani citizens.

Company Registration Offices

To facilitate foreign investors and overseas Pakistanis, this commission has set up special counters with designated officers in three of his Company Registration Offices (CRO) at Karachi, Lahore and Islamabad.

They will provide you special assistance for company incorporation and other related regulatory requirements as well as information pertaining to corporate laws and functioning of the Commission.

Other public services like availability of name, providing of certified copies etc., are rendered on the same day. There is complete automation of the working of CROs with a view to providing facilities like availability of names and incorporation of new companies etc. electronically.

In the eight CRO (Islamabad, Karachi, Lahore, Peshawar, Faisalabad, Multan, Sukkur and Quetta), you can besides registration of companies and monitoring of their working according to law, functions of CRO's include providing services and guidance and also to ensure that the companies and their directors comply with the statutory requirements as provided under the Companies Ordinance, 1984 (the Ordinance).

The record of companies maintained by the CROs is public record and the investors, shareholders, creditors and general public, may inspect the record of any company whenever they need and they may also obtain certified copy of any specific document forthwith on payment of nominal amount of fee.

Types of Legal Forms for Doing Business

There are three main forms of business in Pakistan, defined as follows:

Sole Proprietorship

An individual on his/her own account carries out the business or profession. No formal procedure or formality is required for setting up a sole proprietary.

Partnership

A business relationship entered into by a formal agreement between two or more persons or corporations carrying on a business in common. Such partnerships are created under the Partnership Act of 1932 and if needed is registered with the Registrar of Firms.

Company

A legal entity formed under the Companies Ordinance, 1984. It can have share capital or can be formed without share capital.

Types of Companies

A company having share capital may be formed as:

Unlimited company

Company limited by guarantee

Company limited by shares

Companies limited by shares may further be classified as public limited and private limited companies:

Public Limited Companies can be formed by at least three persons by subscribing their names to the 'Memorandum and Articles of Association' of the company.

Private Limited Companies may be formed by at least two persons by subscribing their names to the 'Memorandum and Articles of Association' of the company.

Forming a Company

The procedures involved in registering either a private or public company are relatively similar. However there are visible differences after incorporation

Any three or more persons can, by subscribing their names to the Memorandum of Association and complying with the requirements of the Companies Ordinance, in respect of a registration, form a public company.

Any one or more persons so associated may, in the same way, form a private company. No government sanction is required for setting up any industry, in terms of field of activity and size, but a prior approval of the ministries is required before incorporation of a company in:

Banking: Ministry of Finance and State Bank of Pakistan

Insurance: Ministry of Commerce

Investment Finance: Ministry of Finance and State Bank of Pakistan

Venture Capital: Securities and Exchange Commission of Pakistan

Asset management: Securities and Exchange Commission of Pakistan

For any of the following industries (arms and ammunition; security printing, currency and mint; high explosives; radio active substances): Ministry of Industries and Board of Investment

Incorporation of a Company

To get incorporated a company has to register with the Companies Ordinance, 1984 Securities and Exchange Commission of Pakistan. This task is now done by the Registration Department, Company Law Division also known as Company Registration Offices, in the same day or at least within three days.

1. The name:

The first step in the incorporation of a company is to confirm the availability of the name of the proposed company from the Company Registration Office. A fee is required for seeking availability certificate. The name should not be inappropriate, deceptive or designed to offend religious feelings, and it should neither be identical nor have a close resemblance to the name of any existing company.

2. Memorandum of Association

An important step in the formation of a company is to prepare a document called Memorandum of Association. It is the charter of the company that contains the basic conditions on which the company is incorporated (the name, the State in which the registered office is to be situated, the main objects of the company to be pursued, the liability of the members and the authorized capital).

3. Articles of Association

Articles of Association of the company are the regulations that govern the internal management of affairs of the company and the conduct of its business. The Articles are subordinate to the Memorandum of Association.

4. Registration of a Company

A foreign company (incorporated outside Pakistan) is required to deliver following documents to the concerned Registrar with 30 days of the establishment of its place of business in Pakistan:

A certified copy of the Memorandum of Association and Articles of Association in the English language, duly authenticated by a Pakistani diplomatic consular and accompanies by the prescribed form (38)

Address of the registered or principal office in a country of origin (Form 39)

A list of Director, Chief Executive and Secretary of the company (Form 40)

Particulars of the principal officer of the company in Pakistan (Form 41)

Particulars of person(s) resident in Pakistan authorized to accept service on behalf of the foreign company (Form 42)

Address of principal place of business in Pakistan of the foreign company (Form 43)

Paid challan for the filing fee of each document deposited in the designated corporate branches of Habib Bank Limited

Foreign company is required to file annually with the registrar concerned annual accounts in respect of its operations within Pakistan and its global accounts together with the list of Pakistani members and debenture holders and particulars of places of business in Pakistan within the prescribed period.

It is also required to give notice (Form 46) to the registrar concerned at least 30 days before it intends to cease business in Pakistan and to publish a notice of such intention at least in two daily newspapers circulating in the province in which place of business is situated.

Setting up a Branch Office

Opening of a Liaison /Branch Office of foreign firms:

Foreign companies that intend to undertake export activities in Pakistan will be registered without any formality

Permission to companies engaged in contractual obligations of contracts with public sector entities will be granted on production of valid documents without circulating to government departments

For companies that wish to open their branch/ liaison or representative offices in Pakistan may apply to BOI for permission on prescribed form. The BOI will process and decide such cases within a period of 6 to 8 weeks

Details on the required documentation, etc, are available at all offices of BOI.

Permission for opening of branch/ liaison office may be granted by the BOI for a period of 3 to 5 years. Further extension will be granted by the BOI after reviewing and examining the past performance of foreign companies. Request for renewal or extension will be processed by the BOI with two weeks provided the requests are supported with complete documentation.

Remittance of profits etc., may be allowed to Branch Offices subject to submission of information/documents as required in terms of Para 13, Chapter XIV of the Foreign Exchange Manual of State Bank of Pakistan. However, Liaison office may not be allowed.

Required Documents

A foreign company incorporated outside Pakistan, is required to submit the following documents to the concerned agencies within 30 days of establishing presence in Pakistan:

A certified copy of the charter, statute or Memorandum and Articles of the company, in English or Urdu, accompanied by prescribed Form 38

Address of the registered or principal office of the company on Form 39

A list of Directors, the Chief Executive and Secretaries (if any) of the company on Form 40

Particulars of the principal officer of the company in Pakistan on Form 41

Particulars of person (s) resident in Pakistan authorized to accept services on behalf of the foreign company on Form 42

Address of the principal place of business in Pakistan of the foreign company on Form 43 (Section 451)

Any change or alteration in particulars stated at serial No. 1 to 6 above is required to be filed on Form 44 with the registrar concerned within 30 days of such change or alteration (section 452).

Foreign company is required to file annually with the registrar concerned annual accounts in respect of its operations within Pakistan as well as its global accounts together with the list of Pakistani members and debenture holders and particulars of places of business of the company in Pakistan within the prescribed period (Section 453).

Foreign company is required to give notice on Form 46 to the registrar concerned at least 30 days before it intends to cease to have a place of business in Pakistan and to publish a notice of such intention at least in two daily newspapers circulating in the province or provinces in which such place or places of business are situate.